ENBD REIT announces Q1 NAV of USD 215 million; Balance sheet and cash flows healthy while cost controls mitigate pressures

ENBD REIT (CEIC) PLC (“ENBD REIT”), the Shari’a-compliant real estate investment trust managed by Emirates NBD Asset Management Limited, has announced its Net Asset Value  (“NAV”) for the first quarter ended 30th June 2020. ENBD REIT’s NAV stood at USD 215 million, as compared to USD 230 million for the previous quarter. The decline in NAV is largely attributed to pressure on portfolio valuations, mainly due to soft real estate market conditions and macroeconomic uncertainty around Covid-19. A leasing strategy to cater to tenants’ needs during the pandemic has helped to partially safeguard occupancy, but has not entirely mitigated the impact of challenging market conditions. As at 30th June, blended portfolio occupancy stood at 76%, declining from 82% in the previous quarter.

The REIT’s Loan to Value ratio (“LTV”) has increased to 48% from 44% in the previous quarter, following valuation losses and drawdown of USD 13.6 million (AED 50 million) earmarked for upgrades to certain assets in the portfolio. ENBD REIT remains fully in compliance with all its debt covenants, and recently secured a hedging agreement with Mashreq Bank – covering 56% of its total debt – to reduce and fix finance costs until June 2023. Despite market pressures, the REIT sustained stable cashflows throughout the first quarter, maintaining a sustainable cash position since payment of the USD 5.1 million final dividend in July 2020.

Anthony Taylor, Head of Real Estate at Emirates NBD Asset Management, said:

"Rental income from our portfolio is down on a year-on-year basis, mainly due to the relief measures that we have introduced for struggling tenants, along with lower occupancy in certain office and residential buildings. We have, however, been successful in managing down costs, with total expenses reduced by 20% compared to 30th June 2019, due to lower finance costs resulting from refinancing, reduced management fees, and active cost saving initiatives rolled out with service providers across our properties. Most recently, we have taken advantage of a lower interest rate environment to hedge our Shari’a-compliant debt facilities, fixing a significant portion of our debt, the REIT’s single largest cost, at lower levels for the future. We are now looking at important upgrades to certain assets, which will support our leasing efforts in 2020 and 2021.”

In response to the economic impact of Covid-19, ENBD REIT has been active in seeking solutions for tenants who are in genuine financial distress, thereby bolstering occupancy. To date, 71 tenants have engaged with management for rent relief, with USD 2.7 million (AED 9.8 million) offered as deferred payments. The impact of the pandemic on cash flow is anticipated to be in the region of 4-6% of the last financial year’s total revenue.

The total dividend paid to shareholders for the year ended 31st March 2020 was USD 10 million – equivalent to an annualised dividend return of 4.35% of the cum-dividend NAV, and 11.2% of ENBD REIT’s share price.  As at 30th June 2020, the REIT’s Gross Asset Value (“GAV”) stood at USD 410 million, with the portfolio’s Weighted Average Unexpired Lease Term (“WAULT”) at 3.2 years.